If passive income sounds appealing to you, then so should passive saving.

Before I walk you through the passive savings process, for comparison’s sake, I think it’s helpful to share how I earn passive income.

In late 2010, I decided to rent my apartment out on Airbnb.com. Prior to listing my unit, I knew I had my work cut out for me.

My place was okay, but there were a lot of changes I needed to make in order to be competitive with other hosts in my area. I spent many evenings and weekends buying and assembling furniture, cleaning out closets, hauling crap to the thrift store, posting items on Freecycle, shopping for extra linen, and organizing closets.

All told, I put in over 100 hours making my apartment suitable for guests and at least $500 making it pretty BEFORE earning a cent of income. It was a lot of work. (There’s that word again). But when I finally filed my 2011 income tax returns this year, I happily reported about $5,000 of rental (passive) income.

The good thing is now all I have to do is clean my place before guests arrive, accept and decline reservation requests, and answer a few emails here and there. The hard stuff was done over a year ago.

Here’s the simple, 3-step process for quickly finding savings that will pay off again and again.

Step #1 – Write down all fixed expenses

This is simple enough. If an expense has a set/contractual price, it should be captured in this step. We’re talking about rent/house payment, car note, day care, insurance premiums, tuition, cable, internet service, banking fees. You get the idea.

Step #2 – Eliminate what you don’t use

Ax recurring services that don’t provide any value to you such as online newspaper subscriptions you don’t read, a home phone you never answer, or *clears throat* a gym membership you haven’t used in months and won’t use for the foreseeable future.

Get rid of these expenses first because they, generally, don’t require much effort. You don’t need to negotiate with anyone. You don’t have to find a substitute for the service. None of that.

If you don’t use it, you won’t miss it.

Step #3 – Cut what you can

For every other fixed expense, ask yourself, “What actions do I need to take to cut this expense indefinitely ?” It could take 15 minutes or 15 hours to reduce an expense.

Obviously, the more time you put into an activity the greater you’ll want the payoff to be.

For instance, relocating is a relatively time intensive way to save money. You’ll spend tens of hours house hunting, packing, moving, unpacking, etc. But if you can reduce your rent by $300 a month for years to come, the decision could save you thousands of dollars. In which case, the time investment is worth it. Likewise, switching cellular service providers shouldn’t take more than an hour or so, but may result in you saving $20 a month.

Keep in mind, like any investment, the passive savings strategy doesn’t always work. I could’ve spent 100 plus hours readying my apartment for guests only to discover that I really hate having people in my private space and discontinued the whole project.

Likewise, you could interview multiple day care providers and discover you already have the best deal in town. You could thumb through hundreds of pages of heath insurance plans and decide you can’t stomach the risk of changing insurers.

But you won’t know how much money you could be saving until you put in the work.

About the Author

Shawanda Greene is a free thinking, frugal gal whose only vices are boxed wine, lip balm and money grubbing. You can find more of Shawanda's musings at You Have More Than You Think – a productivity focused guide to maximizing the money you have to obtain more of what you want.

Jefferson Grant

This topic is really interesting and I think that all you say it’s true, always I try to find the way to turn time into money because if you think big you will have large benefits. Thanks really nice blog.”If you have a clean financial score in your payments, you could be happy”

Call me biased, but using coupons – whether shopping online or in-store, is a great way to passively save money. It does takes a bit of research to ensure you are getting the best deal & also making sure you’re not just using them for things you really don’t need – that is key. I also use the group buying deals quite a bit for hair salon services and have saved a bundle. But again, carefully scrutinize every deal to make sure its worth it!

Wish I could ditch my cell provider! That would save me hundreds. Unfortunately, I live in a small town and they’re the only one w/ decent service. I have friends who say, “Yeah, I can’t use my phone in my house, but at least it doesn’t cost much!” What good is a phone you can’t use at home? I do save $50 a month, though, by not having a smartphone (that’s how much Verizon’s data plan costs). Every time I wish I could use Instagram or some other nifty app, I think to myself, “Is it worth $600 a year?” So far, the answer has been no.